Francois Villeroy de Galhau, the former BNP Paribas SA executive who was nominated on Tuesday to run the Bank of France, will now have to fend off questions about conflicts of interest.
Villeroy spent 12 years at France’s biggest lender, joining the executive committee in 2008 and becoming chief operating officer in 2011 before leaving this year. His new role would put him on the Governing Council of the European Central Bank, giving him a say in bank supervision and regulation as well as its 1.14 trillion-euro ($1.3 trillion) bond-buying program.
“He’ll have to show that the separation from BNP is watertight,” Gilles Carrez, president of the finance committee in France’s National Assembly that must approve the appointment, said in an interview. “He’ll be asked questions about this and his answers will have to be as firm as possible.”
The 56-year-old Frenchman is hardly the first central banker to have come from a private lender. ECB President Mario Draghi is an alumnus of Goldman Sachs Group Inc. and Bank of England Governor Mark Carney spent 13 years at Goldman with postings on three continents.
Questioned last week, Villeroy said he wouldn’t allow himself to be influenced by his former employer. “I guarantee you that there would never be any conflict-of-interest situation,” he said on France Info radio.
BNP Paribas was ordered last year to pay a record $8.97 billion fine to settle a criminal case that it violated U.S. sanctions by processing transactions involving Sudan, Iran and Cuba. The bank admitted it engaged in a conspiracy from 2004 to 2012 to violate embargoes imposed on the three nations designated as state-sponsors of terrorism.
Villeroy would replace Christian Noyer, who retires in November. The nomination by President Francois Hollande, which a French senate committee must also approve, comes after months of speculation over contenders for the coveted Group of Seven central-bank post. The governor also helps shape financial regulation through the Bank for International Settlements and the Financial Stability Board.
Possible candidates included ECB Executive Board member Benoit Coeure, the French president’s economic adviser Laurence Boone, and Claire Waysand, the chief of staff to French finance minister Michel Sapin.
The 46-year-old Coeure is a key architect of ECB policy at a time when the central bank must consider whether subdued inflation and the risk of a global economic slowdown warrant more monetary stimulus.
Coeure has been “the ECB’s quantitative easing man since the start,” said Maxime Sbaihi, an economist at Bloomberg Intelligence in London. Replacing him “could have sent the wrong signal, also because he counts as one of Draghi’s closest allies. This decision preserves the stability of the ECB board and spares Draghi and the euro-area leaders another round of highly political musical chairs.”
Carrez noted that Villeroy spent more than a decade at the French finance ministry and so has the experience for the new post.
“Villeroy is highly qualified and dedicated to public service,” he said. “He has an excellent professional reputation.”